Sales figures. Although the auto industry may be flush with statistics, these accounting numbers are hardly the pivot of arguments that rage (at times almost violently) between petrolheads.
FUTURE IMPERFECT?: Germany’s Prancing Horse supercar badge is in fine shape. To secure its future, will it be forced to ignore its most significant product, the 911...?
Engine power. Acceleration times. Top-speed. Lateral g. They are the digits fundamental to animating the imaginations of petrolheads and auto enthusiasts.
Sales? That’s business. Boring.
Well, no, not really.
Sales figures are crucial. They yield insight to what lies ahead for the industry in terms of future models and product planning. This brings me to Porsche, the world’s most profitable auto brand.
Porsche was taken over by VW in a rather unhappy family spat two years ago but, as a subsidiary in the mighty VW organogram, the brand has done remarkably well.
Sales are up, there are more 911 derivatives available now than ever (an unbelievable 25) before and its renowned engineering is being showcased in the best possible way to capitalise on the market of tomorrow – hybrid high-performance cars such as the 918 series concept cars.
Porsche’s goal is simple...
Martin Winterkom who, in his position as VW boss now also sets the agenda for Porsche, would like Zuffenhausen to increase its current order book from 95 000 cars a year to 150 000. That’s a big ask, fraught with two possibly critical consequences.
First, the reason Porsche is so profitable (registering industry best-profit margins per car built) is thanks to an industrial engineering system flawlessly geared to support its current production volumes.
Porsche’s assembly process optimises efficiency and has negligible contingency capacity. No "just-in-case" parts build-up on its inventory.
LESS IS MORE: No other auto maker builds fewer cars for more profit than Porsche. With a mooted production facility due in China, will the assembly standards remain?…
If Porsche doubles the capacity and output of this preciously balanced system, will it start to fail? Could quality decrease as volumes increase, especially if they double, as planned? China is an increasingly important market. Porsche is planning to build cars there (to benefit from the economies of scale) which may increase doubts surrounding future product quality.
The second issue, also underpinned by Winterkom’s goal of doubling Porsche sales volumes, is the question of brand dilution. When Porsche nearly went bankrupt in the early 1990's it was the company’s signature product, the 911, that saved it.
Supporting the 911’s "saviour" position in the Porsche portfolio was a counter-intuitive bit of product planning, an entry-level soft-top - the Boxster. The success of these two cars in bringing Porsche back from the brink to record profitability in less than a decade is a worthy study for any MBA student.
IS 911 INFLUENCE WANING?
Today things are rather different. Porsche’s future is markedly less 911-based and its range expansion has been driven by bigger cars, not smaller ones.
As upsetting as the Cayenne SUV and (to a lesser extent) Panamera four-door are to 911 traditionalists, these cars have, in a relatively short time, usurped Porsche’s long-serving rear-engined hero in sales.
Peruse the numbers and the truth is self evident: the 911 is no longer the brand’s most popular car, by quite some way.
MISCONCEPTION?: Chinese Transsyberia Rally participants, in their vehicle of choice – the Porsche Cayenne. Current (and former) communist markets identify more closely with Porsche SUV's than any of its traditional products.
Porsche sold 10 292 Cayennes in the third quarter of 2010, 5778 Panameras and 3130 911's. Inconceivable as it may seem, the 911 is now only the third best-seller in Porsche’s product portfolio.
Any auto industry analyst that predicted such a state of affairs at the turn of the century would have been answered by a wall of judgemental silence.
What does this mean for Porsche as a brand, though?
To all intents and purposes the company has been inextricably linked with the 911 range for more than half a century. If the Cayenne and Panamera are production priorities (as they have already become) will the 911 still be able to make its unique (rear-engined) demands on Porsche’s design and assembly engineering resources? Moreover, does the receding importance (reflected by its displaced position in the company’s sales chart) of the 911 in any way harm the way Porsche is perceived as the definitive premium performance brand?
The reason Porsche has managed, traditionally, to record profit margins per car is in part thanks to its (as mentioned earlier) impeccable industrial engineering and assembly system (limiting costs) and, in no small part, to the hefty price people have been willing to pay for the privilege of owning a 911 (maximising profit opportunity).
Am I saying the 911’s overpriced? No, it is perceived as the world’s best performance driving experience with the least troublesome ownership experience and customers are willing to pay a handsome premium for a vehicle with such characteristics.
Here the converse question has to be asked: for what are the Panamera and Cayenne perceived as being best in class at? Exactly.
There is an irony to all this: none of the traditional Porsche brand perceptions matter any more. Whether the 911 becomes a fringe product, hidden in a back corner of the showroom near the coffee machine, is of little consequence to the future of the Porsche brand – bizarre as that may sound. Why? The answer is simple: China.
The world’s most populous country is scarily near to replacing the US as the world’s largest (and most important) auto market. All brands will have to realign their product planning to cater for Chinese tastes, which can be rather odd.
What does mean for Porsche? A possible future product planning matrix with scant regard to further 911 development.
When I visited China two years ago local auto-market analysts were united in their views: Chinese premium buyers wanted large four-door limousines and SUV's, not dynamically tailored two-door performance cars. China does not offer the quality of roads (or scarcity of traffic) to really make the 911 ownership experience come into its own – as it does in other markets.
A senior Porsche engineer even admitted to me, during a Panamera media event in Europe, that many Chinese Cayenne owners don’t even know Porsche builds a 911 coupe; they think Porsche is purely a German SUV brand. That factoid will be scarier to most 911 acolytes than the switch from air to water-cooling when the 993 became 996 in the late 1990's…
Make no mistake; the future of Porsche is secure. With an order book for 2011 predicted to peak at 110 000, the company is well on its way to achieving VW boss Martin Winterkom’s 150 000 vehicle target. Demand from China will undoubtedly be crucial to achieving that figure, supported by a second (smaller) SUV, the Cajun.
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Unfortunately, that same demand is in no way sensitive to Porsche’s heritage, and you can’t really blame the Chinese; theirs is new money buying into Porsche’s new-money products – it is fully understandable. Russians are just as nouveau riche in their purchasing habits; unsurprisingly the Cayenne is huge there, too.
What this means is that the 911 could go from its current 20-odd derivative halo-car position to a fringe product within a decade’s. The only sacred area in which the 911 is still revered and left to its own devices is motorsport, where it is the most successful competition car in history.
Impossible? Stranger things have happened. Remember when we all laughed at predictions that the Cayenne would become the best-selling Porsche within a decade of its launch? Well, it's hardly funny now that it's happened, is it?